Reps. Goodlatte, Marino Move to Enact Permanent Ban on Local, State Internet Taxes

A handful of lawmakers in the U.S. House of Representatives have introduced legislation that would permanently ban states and localities from taxing Internet access.

H.R. 235 would make permanent a ban that Congress first enacted in 1998 and has extended five times. The Permanent Internet Tax Freedom Act (PITFA) was introduced last week by House Judiciary Committee Chairman Bob Goodlatte (R-Virginia), Subcommittee on Regulatory Reform, Commercial and Antitrust Law Chairman Tom Marino (R-Pennsylvania), and Reps. Anna Eshoo (D-California), Steve Chabot (R-Ohio) and Steve Cohen (D-Tennessee).

“When Congress first enacted the Internet tax moratorium in 1998, the Internet was still in its infancy. Since then, free from the stifling effects of taxation, the Internet has grown exponentially, becoming a significant driver of economic activity and growth and an essential component of our daily lives,” Chabot said in a statement that accompanied a press release. “By making the moratorium permanent, we can foster the Internet’s future growth and innovation, while helping to ensure that Internet access remains affordable for millions of Americans."

Verizon hailed H.R. 235 as legislation that would create certainty for millions of consumers and businesses.

“Consumers’ pocketbooks already get walloped enough with taxes; they don’t need more,” said Peter Davidson, Verizon senior vice president of federal government relations, in a statement. “This is especially true when it comes to their ability to access the Internet, a vital tool for consumers to communicate, learn, enhance their health care or grow their businesses. We want them using the Internet more, not less. Permanently extending the Internet Tax Freedom Act (ITFA) will bring much needed certainty to millions of consumers and businesses alike that their Internet access will be protected from state and local taxes.”

Others, however, oppose a permanent ban and say local and state governments should have the right to decide whether to tax the Internet.

“Permanently banning taxation of Internet access charges would deny the non-grandfathered states almost $6.5 billion in potential state and local sales tax revenues each year in perpetuity,” wrote Michael Mazerov, a senior fellow with the Center on Budget and Policy Priorities, in a July 10, 2014 report.

Mazerov noted that seven states – Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin – currently tax Internet access subscription fees.

“Eliminating the grandfather provision would immediately deprive these states and many of their localities of almost $500 million in annual revenue that helps pay for education, police, and other services,” he declared in the report.

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